LONDON—Starting last year, oil began coursing through a new pipeline running from Iraqi Kurdistan to Turkey, seemingly the first payoff for a handful of companies with the opportunity to drill in one of the world’s biggest untapped oil patches.

A year later, the firms still haven’t been fully paid, highlighting the conundrum of Kurdistan’s oil: Its reserves are among the cheapest to access, but they are a potential target of Islamic State militants and the subject of a paralyzing dispute in Iraq that is only now being resolved

Firms that bet early on Kurdish oil and won rights there—
Genel Energy
PLC and
Gulf Keystone Petroleum Ltd.
of London and Norway’s
DNO AS
DNO 2.43%
A, among others—watched their share prices get pummeled as Iraq’s central government and Kurdistan’s regional leaders fought over the resource last year.

On Friday, Gulf Keystone said it would temporarily halt oil exports from its giant Shaikan field, diverting the crude to the domestic market, where prices are lower but payment is more reliable. DNO and Genel are also planning to sell more oil locally.

“In Iraq, the easy part is getting the oil out of the ground,” said
Ali Khedery,
the chairman and CEO of consultancy Dragoman Partners and a former executive with
ExxonMobil Corp.
in Kurdistan. “The hard part is dealing with the politics.”

Kurdistan’s oil riches are particularly hotly contested. Its efforts to exploit its oil resources infuriated Baghdad, which cut off payments to the region after it had agreed to export oil through a new pipeline to Turkey at the end of 2013. The region was plunged into an economic crisis, even as the local government ramped up exports by truck and pipeline, leaving it unable to pay firms their share for international sales.

Genel is still owed about $230 million for oil exported via the pipeline, or almost half the revenue it expects to report for 2014. Gulf Keystone said in November it was owed $100 million, and HSBC estimated that DNO was also owed $100 million, though the company won’t confirm that.

To date, the firms have gotten just one $75 million payment between them at the end of 2014.

On Jan. 29, a budget agreement in Baghdad cemented a fragile truce between the Iraqi central government and Kurdistan, paving the way for more than $400 million in payments owed to oil companies.

But Gulf Keystone and DNO’s decision to halt exports, for now, dashed hopes regular payments would start soon. Gulf Keystone shares fell more than 17% on the news. Genel and DNO fell 2.4% and 7.4% respectively, on Friday, underperforming the sector.

Henrik Madsen,
a research analyst at Norwegian investment bank Arctic Securities AS, expects the firms to get just half the money they will be owed for oil exports this year. “It’s going to probably be 2016 and maybe longer before you see stable and regular payments received,” he said.

The Kurdistan Regional Government declined to comment.

For the oil companies, Kurdistan’s vast oil riches could make it worth the risk in the long term.

Situated in northeastern Iraq, the Switzerland-sized region is estimated to hold 45 billion barrels of oil. That’s roughly equivalent to the amount BP PLC, Royal Dutch Shell PLC, Exxon and others have extracted from the U.K.’s North Sea since the 1970s.

Crucially, that oil is onshore and relatively straightforward to access, making it cheaper to develop than more technologically challenging offshore fields elsewhere. It costs Genel about $2 a barrel to pump oil from its Kurdish fields, compared with an average of about $26 a barrel for North Sea oil.

But the political problems of producing in Kurdistan are joined by two other looming worries: oil trading at less than $60 a barrel and a surprise advance by Islamic State militants.

One IS attack last summer was close enough that Gulf Keystone Chairman
Simon Murray
could see the smoke rising over the city of Mosul from his hotel room in Erbil. IS fighters didn’t cross the Kurdistan borders and reach the oil fields, but many were shaken by the experience.

“The oil fields are two hours from Erbil. They’re vulnerable, there’s no question about that,” said Mr. Murray, referring to his company’s fields.

Overall, the circumstances have rocked the firms’ share prices. In the past 12 months, as of Friday’s close, Genel and DNO share prices have fallen around 36% and 18% respectively. Gulf Keystone is down more than 67%, as of Friday’s close, in part due to a board struggle, now resolved, over executive pay that led to the departure of the CEO in June.

The companies remain outwardly optimistic, but the lack of clarity on payments leaves them in an uncomfortable position.

Genel is well funded at the moment, thanks to a bond issue last year that raised $500 million, but it’s slashing its capital-expenditure budget 30% for 2015. “It was a roller-coaster year, but we weathered the storm,” said Genel CFO
Julian Metherell,
who is leaving the company in April.

DNO reported a net loss of $252.5 million for the fourth quarter. “2014 was clearly a difficult year, and we’re happy to have it behind us,” DNO Executive Chairman
Bijan Mossavar-Rahmani
told investors this week. The company plans to cut back on spending this year amid lower prices and uncertainty over payments. It has “one foot on the accelerator and one on the brake,” the executive said.

Gulf Keystone is in a more difficult position with $575 million in debt. CEO
John Gerstenlauer
said in a statement Friday that the company’s board is evaluating some longer-term financing options and “taking a prudent approach” to its capital expenditure in 2015.